Dissecting T-Mobile's 'uncarrier-like' plans

Analysts offered divergent opinions of T-Mobile USA's "uncarrier" initiatives for no-contract service and low subsidies for mobile devices announced this week.

Three praised T-Mobile, the fourth-largest U.S. wireless carrier, for taking on its three bigger rivals, but one Gartner analyst said he's skeptical the carrier's ideas will attract more customers.

"It's an interesting attempt by T-Mobile to make a change, but not one that I think will succeed," said Phillip Redman, of research firm Gartner.

A central element of T-Mobile's announcement is the sale of popular new smartphones like the iPhone 5 without a two-year contract or the subsidy offered by other carriers. A T-Mobile iPhone 5 will cost $579 and can be purchased in payments over two years, making it $70 below the price that Apple charges.

T-Mobile also announced three service pricing plans starting at $50 a month that provide unlimited voice, texting and data with no contract. It also launched LTE service in seven U.S. cities.

A major reason that T-Mobile won't succeed is that customers will discover that if they buy a phone through T-Mobile, and then leave T-Mobile and want to use the phone on another network that operates with different radio frequency bands, it is unlikely to work, Redman said.

"Because you can't take T-Mobile's [issued] phone to another operator because of technology differences, there's really no advantage in owning the phone," Redman said.

T-Mobile could be planning to offer the iPhone or other devices with support for an assortment of bands that are workable on other networks, but the carrier has not provided such details. T-Mobile didn't respond to a request to clarify, but CEO John Legere said on Tuesday that an iPhone 5 brought to T-Mobile from another carrier would work well over T-Mobile's AWC bands, and on 1700 Mhz and 1900 Mhz bands on HSPA+.

Redman said that some T-Mobile phones might not work over the GSM 850 Mhz band that is widely used by AT&T. The same could be said for different carriers' LTE networks running over different bands from T-Mobile's, he said.

More generally, Redman is skeptical that many Americans will want to turn away from subsidized phones, which can be purchased for $200 or less with a commitment to a two-year contract. Legere made the case that a two-year contract and an iPhone from AT&T could cost $1,000 more than with T-Mobile over the same period.

Jeff Kagan, an independent analyst, said the success in recent years of pre-paid phone plans with no contracts shows that "a segment of the market place ... clearly prefers a no-contract environment." Kagan termed what T-Mobile is doing as a hybrid between pre-paid and post-paid plans, but closer to post-paid without a contract.

Patrick Moorhead, an analyst at Moor Insights & Strategy, said that even though Legere said it would be simple for a no-contract customer to leave T-Mobile if unsatisified, there is still some confusion about how the departure would work. "They need to work on their messaging for leaving T-Mobile," he said.

Customers can drop monthly voice, text and data service at T-Mobile at any time, T-Mobile said, but a customer must still pay off a phone before it can be unlocked from T-Mobile to use on another carrier's network (assuming it is frequency-compatible). In effect, that leaves the customer tied to T-Mobile unless the customer is willing to pay off the T-Mobile phone or purchase another phone from another carrier.

Moorhead said T-Mobile, with 33 million customers, deserves credit for its for taking on the nation's three bigger carriers. "T-Mobile's plans are a judo move on the likes of AT&T, Verizon and Sprint who have shown little creativity with their subsidy models," he said.

Jack Gold, an analyst at J. Gold Associates, said the plans were designed to help T-Mobile "break out of the pack ... to get some buzz and recover lost customers." He predicted that when customers get accustomed to the new plans and see how much they might save, "they will be receptive."

Still, Gold said that unlimited wireless service pricing plans and lowered phone subsidies won't do everything. "Unless T-Mobile's service and coverage improves, they will have a tough time keeping customers and competing with the big two -- AT&T and Verizon," Gold said. "That's one reason they are finally investing in LTE, but also because they must get better coverage and performance from their networks for the new devices like the iPhone."

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